EURGBP patience scalps: why I size half of EURUSD

[LondonScalper]

EURGBP and I have an odd relationship. It's my most boring pair and, per trade, one of my most reliable. But it's always traded at half the size I'd use on EURUSD, and newer traders sometimes ask why I don't trade it bigger given that it's so steady.

A few reasons.

The ranges are small. EURGBP's average London session range on my data this year is a bit over a third of EURUSD's. My targets are smaller, so the spread and commission take a bigger bite out of each trade. Smaller size doesn't change that proportion, but it keeps the absolute cost of my mistakes small while the margin for error is thin.

The moves, when they come, are sudden. EURGBP can spend three hours in a 12-pip range and then move 30 pips in five minutes on a UK or eurozone headline. Because my stops are tight to match the usual range, those moves cause slippage, and the slippage hurts relative to my targets.

I hold it longer. My average EURGBP trade lasts about three times as long as my average EURUSD trade, because I'm waiting for small moves to develop. More time in the market means more exposure to the surprises above.

It's correlated with my other positions. If I'm long EURUSD and long EURGBP, I'm heavily long euro.

Half size makes it a patience trade rather than a profit engine. That suits me, and it suits the pair.

[Shadow Trader]

The holding time point is the one I underrated for years. Once I started logging minutes in trade, my EURGBP losers lasted almost twice as long as the winners, which told me I was hoping rather than waiting.

Now it gets a time stop of 40 minutes. If the trade has not moved a third of the way to target by then, I close it at market, and the scratched trades cost far less than the ones that used to sit there until a headline picked a side.

On the correlation side, the combination that surprises people is the other one. Long EURUSD with short EURGBP is not a hedge, it is close to a long cable position built out of two spreads instead of one.

I also pull every resting EURGBP order 15 minutes before UK CPI and ECB decisions. Those are the windows where your 12 pip range turns into the 30 pip move, and a tight stop there is just a slippage ticket.

Do you use a time stop on it, or is the patience part of the edge for you? I can imagine a version where cutting early kills the best trades.

[Shadow Trader]

LondonScalper, one detail on the half size itself. EURGBP pips are priced in pounds, so with cable around 1.30 a pip on one lot is worth about 13 dollars against 10 on EURUSD, and half the lots ends up near two thirds of the money per pip.

I size it by risk in account currency now rather than by lots, which made the comparison honest. It showed my EURGBP stops carried more weight than I thought.

The cost side is where the pair really bites. My round trip on EURUSD runs about 0.8 pips against a 10 pip target, while EURGBP costs me about 1.0 pip against a 4 pip target.

img_13097_r2.png (53.1 KiB) Viewed 2 times

The illustration shows cost as a share of target: 8% on EURUSD, 25% on EURGBP at a 4 pip target, and 16.7% when I stretch the EURGBP target to 6 pips. Size changes none of those ratios.

So the fix I lean on is fewer EURGBP trades with wider targets, mostly between 09:00 and 11:00 London. The 4 pip version only survives on the tightest spread days.

What target do you run on it, in pips? With a session range about a third of EURUSD, I wonder how much room there really is for 6.